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Help with loop, hangman game.

Hello, im a beginner programmer and I have been assigned to code a hangman game. Its taken me quite a bit of time to get to where im at now, and although my code is not really well organized, at this point im just trying to make it work. The class im in is about data structures so Im sure ill get a better understanding at the end of the semester.
My problem is this:
I made a loop to compare the guessed character against the "mystery word" (which is given by one of the users(2 player game), and it is working great so far except for how to make characters appear more that once in the word? ex. good --> *oo*
I've done a search looks like some people asked the same question, yet I dont see how the answer works in here: